Quote of the Day: Manipulating Public Opinion to Foment War

Today, the most likely culprit are far right Christian fundamentalists, who hate Islam with religious passion, and a group of neconservative businessmen trying to promote war between the US and Muslim world – and namely, Iran. A network of Evangelical broadcasters, publishers and schools churns out a steady stream of anti-Islamic fulminations.

The latest anti-US riots across the Mideast further convinced many Americans that all Muslims are violent extremists. The hate film reinforced the mistaken notion held by many Muslims that the United States is bent on eradicating their faith.

All this fits nicely with efforts by right wing ideologues to push the US into war against Iran. President Obama has so far stoutly refused to give in to war-mongering, no mean feat in an election year in which he is neck-a-neck with Romney.

This week, Israel’s prime minister, Benjamin Netanyahu, demanded Obama openly define the conditions under which the US would attack Iran. Netanyahu’s American supporters accuse Obama of "throwing Israel under a bus." At times, it appears there are three candidates for office in Washington: Obama, Romney and Netanyahu.

Netanyahu scolded and rebuked Obama for not sending American troops and spending American treasure to attack Iran because it is a potential rival or threat to Israel. Netanyahu is now openly backing Romney for president.

In Yiddish, such behavior is called "chutzpah," a mixture of brazen nerve and outrageous presumption.

Add all this up and we have evil memories of the hysteria and military posturing of August, 1914, the lead-up to World War I, a totally unnecessary conflict that ran out of control and wrecked Europe.

Opinion in the Muslim world, America and Canada is being manipulated by those seeking war. A few more killings, a clash in the congested Gulf, a bombing in the west, and a wider Mideast war could erupt.

This is from historian Eric Margolis talking about the wave of attacks on US embassies in the Middle East (source Lew Rockwell.com)

160 Benefits from Coconut Oil

Amazing article on the myriad benefits of coconut oil.

Here is the overview, from Wakeup-World.com (hat tip: Lew Rockwell.com)

Coconut Oil – An Overview

Offering a myriad of health benefits, coconut oil is affordable, readily available and completely natural. I use it for EVERYTHING. Literally. I buy it in 5 gallon increments and keep it all over my house. I even have some in the car. So here is a little information to inspire you to check out this amazing oil!

Coconut Oil Is:

• Anti-bacterial (kills bacteria that cause ulcers, throat infections, urinary tract infections, gum diseases, and other bacterial infections)
• Anti-carcinogenic (coconut oil has antimicrobial properties so it effectively prevents the spread of cancer cells and enhances the immune system)
• Anti-fungal (kills fungi and yeast that lead to infection)

• Anti-inflammatory (appears to have a direct effect in suppressing inflammation and repairing tissue, and it may also contribute by inhibiting harmful intestinal microorganisms that cause chronic inflammation.)

• Anti-microbial/Infection Fighting (the medium-chain fatty acids and monoglycerides found in coconut oil are the same as those in human mother’s milk, and they have extraordinary antimicrobial properties. By disrupting the lipid structures of microbes, they inactivate them. About half of coconut oil consists of lauric acid. Lauric acid, its metabolite monolaurin and other fatty acids in coconut oil are known to protect against infection from bacteria, viruses, yeast, fungi and parasites. While not having any negative effect on beneficial gut bacteria, coconut oil inactivates undesirable microbes.)

• An Antioxidant (protects against free-radical formation and damage)
• Anti-parasitic (fights to rid the body of tapeworms, lice and other parasites)
• Anti-protozoa (kills giardia, a common protozoan infection of the gut)
• Anti-retroviral (kills HIV and HLTV-1)
• Anti-viral (kills viruses that cause influenza, herpes, measles, hepatitis C, SARS, AIDS, and other viruses)
• Infection fighting
• Has no harmful for discomforting side effects
• Known to improve nutrient absorption (easily digestible; makes vitamins and minerals more available to the body)
• Nontoxic to humans and animals

Category of the 160 Uses for coconut oil

-Coconut Oil for Personal Hygiene/Body

-Coconut Oil for General Health and Wellness

-Coconut Oil for Health Problems (when taken internally it is known for aiding, preventing, relieving or even curing these health issues)

-Coconut Oil and Health Problems (when applied topically it is known for aiding, relieving, or even curing these health issues)

-Coconut Oil and Cooking

-Coconut Oil and Pets/Animals

-Other Uses for Coconut Oil

Read the rest here

Ron Paul on the Ben Bernanke’s QE 3.0

No one is surprised by the Fed's action today to inject even more money into the economy through additional asset purchases. The Fed's only solution for every problem is to print more money and provide more liquidity. Mr. Bernanke and Fed governors appear not to understand that our current economic malaise resulted directly because of the excessive credit the Fed already pumped into the system.

For all of its vaunted policy tools, the Fed now finds itself repeating the same basic action over and over in an attempt to prime the economy with more debt and credit. But this latest decision to provide more quantitative easing will only prolong our economic stagnation, corrupt market signals, and encourage even more misallocation and malinvestment of resources. Rather than stimulating a real recovery by focusing on a strong dollar and market interest rates, the Fed's announcement today shows a disastrous detachment from reality on the part of our central bank. Any further quantitative easing from the Fed, in whatever form, will only make our next economic crash that much more serious.

(source Lew Rockwell.com)

Inflation is a policy that cannot and will not last.

Video: Ron Paul on Foolish US Foreign Policies

Neil Cavuto to Congressman Ron Paul "You were decades ahead of this" (hat tip Bob Wenzel)

I Told You So Moment: US Fed’s Bernanke Unveils Open Ended QE 3.0 Bazooka

I guess this serves as another “I told you so moment”.

From Bloomberg,

The Federal Reserve said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month in a third round of quantitative easing as it seeks to boost growth and reduce unemployment.

“We’re looking for ongoing, sustained improvement in the labor market,” Chairman Ben S. Bernanke said in his press conference today in Washington following the conclusion of a two-day meeting of the Federal Open Market Committee. “There’s not a specific number we have in mind. What we’ve seen in the last six months isn’t it.”

Stocks jumped, sending benchmark indexes to the highest levels since 2007, and gold climbed as the Fed said it will continue buying assets, undertake additional purchases and employ other policy tools as appropriate “if the outlook for the labor market does not improve substantially.”…

The FOMC also said it would probably hold the federal funds rate near zero “at least through mid-2015.” Since January, the Fed had said the rate was likely to stay low at least through late 2014. The Fed said “a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.”

Two important things from this development: the FED will engage in “open-ended purchases” of mortgage debt each month and that “federal funds rate near zero “at least through mid-2015.””

This essentially adds to the $267 Operation Twist 2.0 launched last June.

Chart from Doug Short/Business Insider

Bernanke’s panoply of bazookas has been intensifying. Inflationism is being piggybacked by greater inflationism. While this may not be enough (it never will), this may be near the zenith of the Fed’s arsenal of policies. Perhaps the FED will be buying other forms of debt or even equities in the future but may not beat the “open-ended option”

In short I expect diminishing returns from the Fed’s seemingly maxed out actions.

Yet as I previously noted,

With unlimited or open ended options (US Federal Reserve has already been taking this in consideration), central bankers have been increasingly signaling urgency and desperation.

While QE 3.0 provides short term boosts for the financial markets due to its narcotic effects (see the wonderful chart above), the risks is that this RISK ON environment may be short-lived because of the growing risks of stagflation

Chart from Moneyandmarkets,com

The open ended QE 3.0 comes amidst higher inflation expectations which only magnifies price inflation risks.

Of course Bernanke had to deliver, that’s because market’s expectations have built-in heavily to the Fed’s promises, I wrote,

Mounting expectations and deepening dependence from central banking opiate, which has been clashing with the unfolding economic reality, will prompt for more price volatility on both directions. The Bank of America posits that QE 3.0 has been substantially priced in.

Eventually stock markets will either reflect on economic reality or that central bankers will have to relent to the market’s expectations. Otherwise fat tail risks may also become a harsh reality.

Not only that, the fiscal conditions of the US government would require more funding from the FED. This will likely be done indirectly through banks, i.e. FED buys banks mortgages and banks are likely to buy US Treasuries in return. We’ve called the poker bluff (of claims that the FED won’t do QE) here before.

Lastly, Bernanke’s tidal wave of inflationism subtly proves the point that officials work to promote their self-interest; surging stock markets now tilt the balance considerably towards Obama’s re-election.

Again as I wrote,

Also considering that President Obama’s opponent, Mitt Romney, has piggybacked on Ron Paul initiative to have the US Federal Reserve audited, which thereby diminishes the political power of Ben Bernanke, we cannot rule out that Mr. Bernanke will use the banking system and the Fed’s monetary tools to ensure Obama’s re-election.

I’d gradually get exposed on gold related issues. Gold’s bull market has resumed.

Just one more point, the death cross seen in Gold’s price action last April is likely another chart pattern failure as the imminence to the “golden cross” reveals of another “whipsaw”. This once again shows that actions from policymakers shapes chart patterns and not vice versa.

People who claim of the supposed efficacy of begging the question “history repeats itself” have been misled by the gambler’s fallacy.

Many Americans Opt Out of the Banking System

Perhaps mostly as a result of bad credit ratings from lingering economic woes, many Americans have turned into alternative means to access credit financing.

The following report from the Washington Post,

In the aftermath of one of the worst recessions in history, more Americans have limited or no interaction with banks, instead relying on check cashers and payday lenders to manage their finances, according to a new federal report.

Not only are these Americans more vulnerable to high fees and interest rates, but they are also cut off from credit to buy a car or a home or pay for college, the report from the Federal Deposit Insurance Corp. said.

Released Wednesday, the study found that 821,000 households opted out of the banking system from 2009 to 2011 and that the so-called unbanked population grew to 8.2 percent of U.S. households.

That means that roughly 17 million adults are without a checking or savings account. Another 51 million adults have a bank account, but use pawnshops, payday lenders or rent-to-own services, the FDIC said. This underbanked population has grown from 18.2 percent to 20.1 percent of households nationwide.

The study also found that one in four households, or 28.3 percent, either had one or no bank account. A third of these households said they do not have enough money to open and fund an account. Minorities, the unemployed, young people and lower-income households are least likely to have accounts.

This serves as proof that despite the lack of access through the conventional banking system, substitutes will arise to replace them. Demand for credit has always been there. Such dynamic resonates with the post bubble bust era known as the Japan’s lost decade.

I may add that people opting out of the banking system may not at all be about bad credit ratings, they could also represent manifestations of an expanding informal economy in the US. Chart below from Bloomberg-Businessweek includes undocumented immigrant labor, home businesses, and freelancing that escape the attention of tax authorities.

Over the past decade, the informal economy has been gradually ascendant even for developed nations. Advancement in technology may have partly contributed to this.

Although the recession of 2001 (dot.com bust) and the attendant growth in regulations, welfare and ballooning bureaucracies may have been the other principal factors.

My guess is that the post-Lehman era, which highlights governments desperate to shore up their unsustainable fiscal conditions, may only intensify the expansion of the informal economies even in the developed world.

Add to this the growing concerns over the economic viability of the banking system and continued innovation in technology (e.g. P2P Lending, Crowd Sourcing and etc…), the traditional banking system will be faced with competition from non-traditional sources.

Quote of the Day: Wikileaks’ Tweet on US Embassy Attack at Libya

By the US accepting the UK siege on the Ecuadorian embassy in London it gave tacit approval for attacks on embassies around the world.

Source: Business Insider

For a short background, in fear of extradition to the US (through Sweden) out of political harassment for exposing many of the secrets of the US government, Wikileaks founder Julian Assange sought refuge at the Ecuador Embassy in London which was recently besieged by UK officials.

Wikileaks thus attempts to associate the US embassy attack to the harassment being endured by its founder.

Video: Should the Government Track Your Political Activity?

Thanks to Learn Liberty's Tim Hedberg for the video

German Court Clears Way for ESM Fund

There is no stopping the coming inflationism as German’s top constitutional court threw out of the window the legal opposition to the ESM rescue mechanism

From Bloomberg.com

Germany’s top constitutional court cleared the way for the permanent euro-area rescue fund, rejecting bids to halt German ratification of the 500 billion- euro ($644 billion) backstop while imposing some conditions on its use.

The Federal Constitutional Court in Karlsruhe today dismissed motions filed by groups including a conservative lawmaker and an opposition political party that sought to block the fund, known as the European Stability Mechanism, and a deficit-control treaty championed by Chancellor Angela Merkel. The court stipulated that a cap of about 190 billion euros be set on German liabilities before ESM ratification, unless parliament decides to back extra funds.

“The review has concluded that the laws that were challenged, with high probability, do not violate the constitution,” chief justice Andreas Vosskuhle told the court. “Hence the motions for a temporary injunction were to be rejected.”

The legal challenge to the planned rescue fund highlights bailout fatigue in Europe’s largest economy and delayed efforts by Merkel and other euro-area policy makers to stem the region’s debt crisis. In the neighboring Netherlands, Prime Minister Mark Rutte, a Merkel ally, is seeking re-election today…

“Some uncertainties” about the limit on Germany’s contribution to the ESM and the scope of the German parliament’s say over the fund also flowed into the ruling, Vosskuhle said. The judges also said that Germany must state when ratifying that it won’t be felt bound by the treaty unless these reservations are efficiently met.

Today’s cases were filed after German lawmakers approved the ESM and the fiscal pact, a deficit-control treaty designed to impose budget discipline on European Union member states. About 37,000 people signed up to endorse a constitutional complaint filed by political group “Mehr Demokratie e.V.” Other plaintiffs include opposition party Die Linke as well as Peter Gauweiler, a lawmaker from Merkel’s CSU Bavarian sister party.

Perhaps the Fed's Ben Bernanke and the FOMC will make the next move.

Is Al-Qaeda now a US ally in Syria?

The world of politics is a world of smoke and mirrors.

The supposed arch enemy of the US, the Al Qaeda, has reportedly become a US ally in Syria’s civil war.

Writes Joseph Wakim, founder of Australian Arabic Council, at the Canberratimes.au

In Syria, there is mounting evidence that Al Qaeda and its allies are actively deploying terror tactics and suicide bombers to overthrow the Assad regime.

Syrian citizens who prefer the secular and stable state to the prospect of an Iraqi-style sectarian state may well be turning this same question around to the US government: are you with us, or with the terrorists?

This week, head of the Salafi jihad and close ally of al Qaeda, Abu Sayyaf, pledged ''deadly attacks'' against Syria as ''our fighters are coming to get you'' because ''crimes'' by the regime ''prompts us to jihad''.

Bush referred to al Qaeda as the enemies of freedom: ''the terrorists' directive commands them to kill Christians and Jews''. But Sheikh Muhammad al Zughbey proclaimed that ''your jihad against this infidel criminal and his people is a religious duty … Alawites are more infidel than the Jews and Christians''. Because the new jihad targets Alawites rather than Jews and Christians, does this render them better bed fellows?

By his own admission, Bush stated that al Qaeda was ''linked to many other organisations in different countries … They are recruited from their own nations … where they are trained in the tactics of terror … They are sent back to their homes or sent to hide in countries around the world to plot evil and destruction''.

Yet this is precisely how the foreign jihadists in Syria have been described by reporters. They are funded and armed by Saudi Arabia and Qatar. And they collaborate with the Free Syrian Army which is aided and abetted by the US.

Read the rest here.

Ron Paul: US is a Constitutional Republic and Not a Democracy

Congressman Ron Paul reminds Americans that they are supposedly a constitutional Republic and not a democracy (bold emphasis mine)

Democracy is majority rule at the expense of the minority. Our system has certain democratic elements, but the founders never mentioned democracy in the Constitution, the Bill of Rights, or the Declaration of Independence. In fact, our most important protections are decidedly undemocratic. For example, the First Amendment protects free speech. It doesn't – or shouldn't – matter if that speech is abhorrent to 51% or even 99% of the people. Speech is not subject to majority approval. Under our republican form of government, the individual, the smallest of minorities, is protected from the mob.

Sadly, the constitution and its protections are respected less and less as we have quietly allowed our constitutional republic to devolve into a militarist, corporatist social democracy. Laws are broken, quietly changed and ignored when inconvenient to those in power, while others in positions to check and balance do nothing. The protections the founders put in place are more and more just an illusion.

This is why increasing importance is placed on the beliefs and views of the president. The very narrow limitations on government power are clearly laid out in Article 1 Section 8 of the Constitution. Nowhere is there any reference to being able to force Americans to buy health insurance or face a tax/penalty, for example. Yet this power has been claimed by the executive and astonishingly affirmed by Congress and the Supreme Court. Because we are a constitutional republic, the mere popularity of a policy should not matter. If it is in clear violation of the limits of government and the people still want it, a Constitutional amendment is the only appropriate way to proceed. However, rather than going through this arduous process, the Constitution was in effect, ignored and the insurance mandate was allowed anyway.

This demonstrates how there is now a great deal of unhindered flexibility in the Oval Office to impose personal views and preferences on the country, so long as 51% of the people can be convinced to vote a certain way. The other 49% on the other hand have much to be angry about and protest under this system.

We should not tolerate the fact that we have become a nation ruled by men, their whims and the mood of the day, and not laws. It cannot be emphasized enough that we are a republic, not a democracy and, as such, we should insist that the framework of the Constitution be respected and boundaries set by law are not crossed by our leaders. These legal limitations on government assure that other men do not impose their will over the individual, rather, the individual is able to govern himself. When government is restrained, liberty thrives.

Unfortunately, the “increasing importance” that will be “placed on the beliefs and views of the president” or the coming US presidential elections will be determined mostly by the following dynamics:

The jarring charts signifying the “epidemic” of entitlements are from Nicolas Eberstadt of the American Enterprise Institute at the Wall Street Journal

The devolution to “militarist, corporatist, social democracy” is why US fiscal conditions will continue to deteriorate.

Democracy or the rule of men rather than the rule of law self-reinforces on its own destruction.

The Coming Global Default Binge: German Officials Raise US Debt Concerns

German officials say that they are worried over US debt levels

From Reuters.

German Finance Minister Wolfgang Schaeuble questioned on Tuesday how the United States could deal with its high levels of government debt after November's presidential election.

In a speech to the Bundestag lower house of parliament to open a debate on the 2013 German budget, Schaeuble said worries about U.S. debt were a burden for the global economy, hitting back at Washington which has criticized Europe for failing to get a grip on its own debt crisis.

In private, German officials often express concern about U.S. debt levels and the inability of politicians there to reach a consensus on how to reduce it, but Schaeuble's public remarks underscore the extent of the worries in Germany.

US debt levels have indeed been a major source of concern.

But so has been the debt levels of Germany, the Eurozone, UK and Japan. This has mainly been driven by the insatiable spending appetite of these governments.

The worries by German politicians seem no more than an attempt to deflect on their domestic (regional) problems through pot calling the kettle black.(chart from Zero Hedge)

All of them will default in the fullness of time.

Quote of the Day: The Folly of Trusting Competence and Character of Public Officials

It is dangerously naive to trust chiefly in the competence and character of government officials while paying little attention to the temptations and complexities that confront such officials – temptations and complexities that grow exponentially with growth in government’s powers.

This from Professor Donald J. Boudreaux at the Café Hayek

Video: David Stockman: Lunatics at the FED

Former US Representative and Director of the Office of Management and Budget David Alan Stockman bashes the US Federal Reserve in the video below (source LewRockwell.com)

"Ron Paul is the only one who is right about the Fed, and the Fed is the heart of the problem. They have destroyed the capital markets and the money markets; interest rates mean nothing; everything is trading off the Fed and Wall Street isn't even home – as it's now a bunch of computers trading word-clouds emitted by this central banker and that"

"The Fed (and the lunatics that run it) are telling the whole world untruths about the cost of money and the price of risk."

When markets become disconnected with economic reality as I pointed out the other day, these are signs that capital markets have become dysfunctional or capital markets have been "destroyed" from mainly from central banking policies.

The popularity of what Mr. Stockman calls as "sugar" or clamor for the FED to further intervene by monetary inflation in order to further ease credit conditions reminds me of this stirring quote from the great Professor Ludwig von Mises.(bold added)

It is vain to object that the public favors the policy of cheap money. The masses are misled by the assertions of the pseudo-experts that cheap money can make them prosperous at no expense whatever. They do not realize that investment can be expanded only to the extent that more capital is accumulated by savings. They are deceived by the fairy tales of monetary cranks from John Law down to Major C.H. Douglas. Yet, what counts in reality is not fairy tales, but people's conduct. If men are not prepared to save more by cutting down their current consumption, the means for a substantial expansion of investment are lacking. These means cannot be provided by printing banknotes or by loans on the bank books.

In discussing the situation as it developed under the expansionist pressure on trade created by years of cheap interest rates policy, one must be fully aware of the fact that the termination of this policy will make visible the havoc it has spread. The incorrigible inflationists will cry out against alleged deflation and will advertise again their patent medicine, inflation, rebaptizing it re-deflation. What generates the evils is the expansionist policy. Its termination only makes the evils visible. This termination must at any rate come sooner or later, and the later it comes, the more severe are the damages which the artificial boom has caused. As things are now, after a long period of artificially low interest rates, the question is not how to avoid the hardships of the process of recovery altogether, but how to reduce them to a minimum. If one does not terminate the expansionist policy in time by a return to balanced budgets, by abstaining from government borrowing from the commercial banks and by letting the market determine the height of interest rates, one chooses the German way of 1923.

Economic reality will inevitably and eventually prevail.

Quote of the Day: The Unintended Consequences from China’s Infrastructure Spending

Why aren’t China’s leaders spending much more as they did in late 2008 and 2009 to boost economic growth? It might be because much of what they built was defective as a result of widespread corruption. The 8/4 issue of the London Times reported there were 99 road cave-ins in Beijing between July 21 and August 21 of this year. Roads and bridges are collapsing in other cities as well. Most are relatively new including a bridge that was built just 10 months ago.

The country's former railway minister, Liu Zhijun, was expelled from the Communist Party of China for corruption in May following the high-speed train collision that left 40 people dead and 172 injured near the eastern city of Wenzhou last year. In March of this year, part of a high-speed railway line due to open in May between the Yangtze river cities of Wuhan and Yichang collapsed after heavy rain. Engineers working on some projects have complained of problems with contractors using inferior concrete or inadequate steel support bars. Consider this excerpt from the 2/17/11 issue of the NYT:

“The statement underscored concerns in some quarters that Mr. Liu cut corners in his all-out push to extend the rail system and to keep the project on schedule and within its budget. No accidents have been reported on the high-speed rail network, but reports suggest that construction quality may at times have been shoddy. A person with ties to the ministry said that the concrete bases for the system’s tracks were so cheaply made, with inadequate use of chemical hardening agents, that trains would be unable to maintain their current speeds of about 217 miles per hour for more than a few years. In as little as five years, lower speeds, possibly below about 186 miles per hour, could be required as the rails become less straight, the expert said. Strong concrete pillars require a large dose of high-quality fly ash, the byproduct of burning coal. But the speed of construction has far exceeded the available supply, according to a 2008 study by a Chinese railway design institute.”

This is from Dr. Ed Yardeni on China’s slowdown.

China announced last week a 1 trillion yuan $157 billion infrastructure spending program which is much less than the 2008-2009 version.

Nonetheless, the above serves as further proof that infrastructure spending projects by governments, not only waste taxpayers money, but importantly promotes unethical transactions which results to MORE economic and social problems.

Signs of China’s Political Turmoil? China’s VP Xi Jinping Vanishes

Rumors swirl over over China’s VP Xi Jinping’s disappearance from all official functions.

From Financial Times,

Where is Xi Jinping? The man anointed to run the world’s most populous nation and second-largest economy has disappeared from public view just weeks before his expected elevation to lead the Chinese Communist Party.

Over the past week Mr Xi has cancelled at least four scheduled meetings with visiting dignitaries including a Russian delegation, Singapore’s prime minister and US secretary of state Hillary Clinton last Wednesday and the prime minister of Denmark on Monday…

Mr Xi’s mysterious disappearance has sparked speculation about his whereabouts and renewed political infighting just months after the purge of senior Chinese leader Bo Xilai shook the ruling party. It also underscores the opacity and lack of a strong institutionalised mechanism for transferring power in China’s authoritarian one-party political system.

A Bloomberg article says this may be about “health” reasons

I have been saying that the apparent policy dithering to mount bailouts, given the Keynesian propensities of the incumbent, may have been a consequence of the ongoing power struggle within China’s government.

Weather Forecasters are Better Forecasters than Stock Market Experts

Weather forecasters are said to have markedly better batting average making predictions or are far more accurate prognosticators than most stock market experts. (Well this applies to foreign private weather forecasters and not the Philippine government counterpart.)

Justin Rohrlich at the Minyanville writes,

According to New York Times statistical wunderkind Nate Silver, the National Hurricane Center’s accuracy has improved 250% over the last 25 years.

More accurate weather predictions benefit the economy, boosting the efficiency of businesses like FedEx (FDX), which employs 15 in-house meteorologists, as well as companies working offshore, like BP (BP) and Transocean (RIG). Weather is such an important factor in financial markets that Goldman Sachs (GS) employs staff meteorologists, as do Citigroup (C) andJPMorgan Chase (JPM).

While meteorologists have improved, other analysts -- specifically financial ones – are still off the mark more often than not.

“In November 2007, economists in the Survey of Professional Forecasters -- examining some 45,000 economic-data series -- foresaw less than a 1-in-500 chance of an economic meltdown as severe as the one that would begin one month later,” Silver writes.

“Why are weather forecasters succeeding when other predictors fail? It’s because long ago they came to accept the imperfections in their knowledge. That helped them understand that even the most sophisticated computers, combing through seemingly limitless data, are painfully ill equipped to predict something as dynamic as weather all by themselves. So as fields like economics began relying more on Big Data, meteorologists recognized that data on its own isn’t enough.”

So the admission of the knowledge problem is one crucial factor contributing to the weather forecaster’s edge.

I’d add that the unwillingness to think outside the box has been another key variable to why stock market experts underperform.

More…

In a slightly larger than usual nutshell, the crux of the issue was this: Weather forecasters have an “awareness of uncertainty” about the natural world that “causes these experts to manifest a lower overconfidence effect than experts from the other domain.”…

Further, financial analysts were also found to be unwilling or unable to be self-critical after a failure -- something that Raymond Dacey, Professor of Finance and of Statistics and Adjunct Professor of Philosophy at the University of Idaho, suggested to the authors “could pertain to the clients.”

Simply put, the “Disposition Effect” has to do with risk attitude and what Shefrin and Statman colloquially term “get-evenitis” -- an aversion to loss realization.

Another major obstacle is the overconfidence bias

I’d add that egotism has always been a hurdle to self discipline.

Here is a relevant investment ‘war’ tip from Sun Tzu’s Art of War

If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle

Quote of the Day: The State is Not an Instrument of Justice; It's an Instrument of Power

Think about it. If you steal my chicken or I steal your cow, this is a dispute between us; what does the government care about it? The answer should be it doesn't care at all but because the state loves power and the state does not like to share power, it likes to resolve all disputes the way it wants to resolve them. This drives up the cost and diminishes justice because it forces the disputants to follow the state's rule and the state's command and the state's way, and this does not inure to politeness, civility or even the idea that a dispute could possibly be resolved amicably and justly, without the state being involved.

The state is not an instrument of justice; it's an instrument of power

This is from Judge P. Andrew Napolitano interviewed by Anthony Wile at the Daily Bell (source lewrockwell.com)

China’s Imports Drop, Japan’s Economy Slows

Despite the recently announced $157 billion infrastructure spending based bailout, China’s economic decline continues…

From Bloomberg, (bold mine)

China’s imports unexpectedly fell and industrial output rose the least in three years, signaling more stimulus may be needed after the government last week said it approved subway and road projects across the nation.

Inbound shipments slid 2.6 percent in August from a year earlier as exports rose 2.7 percent, the customs bureau said in Beijing today. Production increased 8.9 percent, the National Bureau of Statistics said yesterday. Inflation accelerated for the first time in five months.

The data underscore risks that full-year growth in the world’s second-biggest economy will slide to the lowest in more than two decades, undermining support for the ruling Communist Party before a once-in-a-decade leadership transition due later this year. The rebound in inflation, excess capacity in some industries and banks’ bad debt risks from past monetary easing highlight the potential cost of ramping up stimulus efforts…

China’s trade surplus was a more-than-estimated $26.7 billion as imports fell for the first time since 2009 outside of the Lunar New Year, today’s report showed. Fixed-asset investment growth in the first eight months eased to 20.2 percent, yesterday’s reports showed.

Slowing imports corroborates signs of a steepening slowdown in China’s economic activities.

But for the steroid starved mainstream, inflationism has been never enough. People simply adore the idea of turning stones into bread.

However a rebound in consumer price inflation may put a kibosh on current bailout policies. (chart from Tradingeconomics.com)

Nonetheless, China’s economic deterioration gives more evidence of the seminal phase of the global stagflation dynamic

Well bad news has not been limited to China though, Japan’s economy has reportedly slowed materially.

From the same article…

Japan’s economy expanded in the second quarter at half the pace the government initially estimated, underscoring the risk of a contraction as Europe’s debt crisis caps exports, a government report showed today.

Gross domestic product grew an annualized 0.7 percent in the three months through June, less than a preliminary calculation of 1.4 percent. The nation’s current-account surplus fell to 625.4 billion yen ($8 billion) in July, the lowest for that month since 1996, according to a finance ministry report and Bloomberg historical data.

Both developments exhibit the ongoing global economic slowdown dynamic which stock markets seems to ignore.

The momentum from last week’s rejuvenated equity markets from the combined announcement of bailout packages from ECB and China has so far been carried over today.

It would be interesting to see how Chinese authorities will respond to sustained news of pronounced downswing of their economy.

China’s massive gold imports which in 2012 according to Zero Hedge, has “imported more gold than the ECB's entire official 502.1 tons of holdings” and the current inflationist bailout policies seem as conflicting political moves.

Odds for US Federal Reserve’s QE 3.0 now 99%!

Wow. Markets have already (nearly) fully factored in Team Ben Bernanke to implement QE 3.0.

From Bloomberg,

Just six months ago, money market traders expected the Federal Reserve to raise interest rates by the end of 2013. Now, they see borrowing costs staying at record lows for about three more years as the economic outlook worsens.

Bond market measures from overnight index swaps, which indicate no rise in the federal funds rate until mid-2015, to a 62 percent decline in a measure of volatility in government bonds signal that rates will stay near zero for longer. The gap between two- and five-year Treasury yields, which decreases when traders expect benchmark rates to remain subdued, is more than 50 percent narrower than its average since 2008.

Investor expectations for sluggish growth and low inflation remain intact even though the collapse of Lehman Brothers Holdings Inc., which triggered the worst financial crisis since the Great Depression, happened four years ago. While the economy expanded in the second quarter, the unemployment rate remained above 8 percent for the 43rd-straight month in August…

A gauge of indicators of market expectations for additional central bank stimulus rose to 99 percent in August, the highest ever, according to Citigroup Inc. The measure increased to 82 percent in the months before QE2 in November 2010.

Here is what I wrote earlier,

Mounting expectations and deepening dependence from central banking opiate, which has been clashing with the unfolding economic reality, will prompt for more price volatility on both directions. The Bank of America posits that QE 3.0 has been substantially priced in.

Eventually stock markets will either reflect on economic reality or that central bankers will have to relent to the market’s expectations. Otherwise fat tail risks may also become a harsh reality.

My guess is that Mr. Bernanke, like his ECB counterpart Mr. Draghi, will relent. Otherwise whatever gains accumulated of late may all go down the drain.

Besides, it seems Bernanke’s personal interest to see rising stock markets.